UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to _____________
Commission file number 33-19811
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DIVERSIFIED HISTORIC INVESTORS VI
- ----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2492210
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1609 Walnut Street, Philadelphia, PA 19103
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Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 557-9800
N/A
- ----------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - June 30, 1999 (unaudited)
and December 31, 1998
Consolidated Statements of Operations - Three Months and
Six Months Ended June 30, 1999 and 1998 (unaudited)
Consolidated Statements of Cash Flows - Three Months and
Six Months Ended June 30, 1999 and 1998 (unaudited)
Notes to Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
(1) Liquidity
As of June 30, 1999, Registrant had cash of
$18,433. Cash generated from operations is used primarily to fund
operating expenses and debt service. If cash flow proves to be
insufficient, the Registrant will attempt to negotiate loan
modifications with the various lenders in order to remain current on
all obligations. The Registrant is not aware of any additional
sources of liquidity.
As of June 30, 1999, Registrant had restricted
cash of $281,717 consisting primarily of funds held as security
deposits, replacement reserves and escrows for taxes and insurance.
As a consequence of the restrictions as to use, Registrant does not
deem these funds to be a source of liquidity.
In recent years the Registrant has realized
significant losses, including the foreclosure of two properties and a
substantial reduction of interest in a third property. At the present
time, all remaining properties are able to pay their operating
expenses and debt service including two of the six properties where
the mortgages are basically "cash-flow" mortgages, requiring all
available cash after payment of operating expenses to be paid to the
first mortgage holder. None of the properties are currently producing
a material amount of revenues in excess of operating expenses and debt
service. Therefore, it is unlikely that any cash will be available to
the Registrant to pay its general and administrative expenses.
It is the Registrant's intention to continue to
hold the properties until they can no longer meet the debt service
requirements and the properties are foreclosed, or the market value of
the properties increases to a point where they can be sold at a price
which is sufficient to repay the underlying indebtedness (principal
plus accrued interest).
(2) Capital Resources
Any capital expenditures needed are generally
replacement items and are funded out of cash from operations or
replacement reserves, if any. Registrant is not aware of any factors
which would cause historical capital expenditure levels not to be
indicative of capital requirements in the future and accordingly, does
not believe that it will have to commit material resources to capital
investment for the foreseeable future.
(3) Results of Operations
During the second quarter of 1999, Registrant
incurred a net loss of $365,829 ($14.22 per limited partnership unit)
compared to a net loss of $361,911 ($14.08 per limited partnership
unit) for the same period in 1998. For the first six months of 1999,
the Registrant incurred a net loss of $892,698 ($34.72 per limited
partnership unit) compared to a net loss of $838,697 ($32.61 per
limited partnership unit) for the same period in 1998.
Rental income increased $8,694 from $581,156 in
the second quarter of 1998 to $589,850 in the same period in 1999 and
increased $31,446 from $1,153,071 in the first six months of 1998 to
$1,184,517 in the same period in 1999. The increase in rental income
for both the second quarter and first six months of 1999 is due to an
increase in rental income at Canal House, Strehlow Terrace, Mater
Dolorosa and Firehouse Square partially offset by a decrease at
Roseland.
Expenses for rental operations increased by
$21,800 from $229,151 in the second quarter of 1998 to $250,951 in the
same period in 1999 and increased $31,453 from $575,846 in the first
six months of 1998 to $607,299 in the same period in 1999. The
increase from the second quarter and the first six months of 1998 to
the same periods in 1998 is due to an increase at Canal House due to
an increase in apartment preparation expense resulting from a higher
turnover of apartment units. The increase is partially offset by a
decrease at Strehlow Terrace due to an overall decrease in operating
expenses due to operating efficiencies achieved at the property.
Depreciation and amortization expense decreased
$254 from $289,080 in the second quarter of 1998 to $288,826 in the
same period in 1999 and increased $64,331 from $578,161 for the first
six months of 1998 to $642,492 in the same period in 1999. The
increase from the first six months of 1998 to the same period in 1996
due to a refinancing at Canal House in January 1999 which caused a
significant increase in amortization expense partially offset by a
decrease in amortization expense at Firehouse Square due to the
amortization in 1998 of leasing commissions for tenants who vacated in
the first quarter of 1998 which was not repeated in the first quarter
of 1999.
Interest expense decreased by $10,051 from
$362,971 in the second quarter of 1998 to $352,920 in the same period
in 1999 and decreased $11,073 from $712,862 in the first six months of
1998 to $701,789 for the same period in 1999. The decrease from
second quarter and the first six months of 1998 to the same periods of
1999 is the effect of decreases in interest expense at Firehouse
Square due to its October 1998 mortgage refinancing and at Mater
Dolorosa due to a decrease in the principal balance of the mortgage
loan. The decrease is partially offset by an increase in interest
expense at Canal House as a result of its 1999 mortgage refinancing.
Losses incurred during the quarter at the
Registrant's properties amounted to $287,000, compared to a loss of
approximately $283,000 for the same period in 1998. For the first six
months of 1999 the Registrant's properties recognized a loss of
$733,000 compared to approximately $680,000 for the same period in
1998.
In the second quarter of 1999, Registrant incurred
a loss of $24,000 at Roseland including $17,000 of depreciation
expense, compared to a loss of $15,000 including $16,000 of
depreciation in the second quarter of 1998; for the first six months
of 1999, the Registrant incurred a loss of $38,000 including $34,000
of depreciation expense, compared to a loss of $26,000 for the same
period in 1998, including $36,000 of depreciation expense. The
increase in the loss from the second quarter and the first six months
of 1998 to the same periods of 1999 is due to a decrease in rental
income and an increase in wages and salaries expense. The decrease in
rental income is due to a decrease in the average occupancy (100% to
94%). The increase in wages and salaries expense is due to a change
in the management company which increased the maintenance staff at the
property.
In the second quarter of 1999, Registrant incurred
a loss of $131,000 at Firehouse House including $65,000 of
depreciation and amortization expense, compared to a loss of $149,000
including $71,000 of depreciation and amortization expense in the
first quarter of 1998. For the first six months of 1999, the
Registrant incurred a loss of $239,000 at Firehouse Square including
$129,000 of depreciation and amortization expense, compared to a loss
of $285,000 for the same period in 1998, including $141,000 of
depreciation and amortization expense. The decrease in the loss from
the second quarter and the first six months of 1998 to the same
periods in 1999 is due to an increase in rental income combined with a
decrease in interest and amortization expense. The increase in rental
income is due to an increase in the average rental rates while the
occupancy remained at 100%. Interest expense decreased due to the
refinancing which occurred in October of 1998 which lowered the
overall interest expense. Amortization expense decreased as a result
of the amortization in 1998 of leasing commissions for tenants who
vacated in 1998.
In the second quarter of 1999, Registrant
recognized income of $10,000 at Mater Dolorosa including $32,000 of
depreciation and amortization expense, compared to income of $5,000
including $31,000 of depreciation and amortization expense in the
second quarter of 1998, and for the first six months of 1999, the
Registrant recognized income of $11,000 at Mater Dolorosa including
$63,000 of depreciation and amortization expense, compared to a loss
of $19,000 for the same period in 1998, including $63,000 of
depreciation and amortization expense. The increase in income from
the second quarter and the first six months of 1998 to the same
periods in 1999 is due to an increase in rental income combined with a
decrease in interest expense and overall operating expenses. Rental
income increased due to an increase in the average rental rates.
Interest expense decreased due to a decrease in the principal balance
of the mortgage loan. Operating expenses decreased due to operating
efficiencies achieved at the property.
In the second quarter of 1999, Registrant incurred
a loss of $47,000 at Strehlow Terrace including $59,000 of
depreciation expense, compared to a loss of $58,000 including $58,000
of depreciation expense in the second quarter of 1998 and, for the
first six months of 1999, the Registrant incurred a loss of $106,000
including $118,000 of depreciation expense, compared to a loss of
$112,000 for the same period in 1998, including $116,000 of
depreciation and amortization expense. The decrease in the loss from
the second quarter and the first six months of 1998 to the same
periods in 1999 is due to an increase in rental income and a decrease
in maintenance expense. The increase in rental income is due to an
increase in average rental rates while occupancy remained stable. The
decrease in maintenance expense is due to a lower turnover of
apartment units as compared to the prior year.
In the second quarter of 1999, Registrant incurred
a loss of $91,000 at Canal House including $97,000 of depreciation and
amortization expense, compared to a loss of $53,000 including $93,000
of depreciation expense in the second quarter of 1998 and, for the
first six months of 1999, the Registrant incurred a loss of $354,000
including $259,000 of depreciation and amortization expense, compared
to a loss $232,000 for the same period in 1998, including $186,000 of
depreciation expense. The increase in the loss from the second
quarter and the first six months of 1998 to the same periods in 1999
is due to an increase in maintenance, interest and amortization
expense partially by an increase in rental income. The increase in
maintenance expense is due to an increase in apartment preparation
expense resulting from a higher turnover of apartment units. Interest
expense increased due to a higher principal balance upon which
interest is accrued due to a refinancing of the first mortgage in the
first quarter of 1999. Amortization expense increased due to the
amortization of loan costs incurred in the refinancing. Rental income
increased due to an increase in the average rental rates.
In the second quarter of 1999, Registrant incurred
a loss of $4,000 at Saunders Apartments compared to a loss of $3,000
in the second quarter of 1998 and for the first six months of 1999,
the Registrant incurred a loss of $7,000 compared to a loss $6,000 for
the same period in 1998. The Registrant accounts for this investment
on the equity method and the increase in the loss is due to an
increase in maintenance expense due to the painting of several units
and repairs made to the floor.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
Assets
June 30, 1999 December 31, 1998
(Unaudited)
Rental properties, at cost:
Land $ 950,238 $ 950,238
Buildings and improvements 27,178,203 27,176,328
Furniture and fixtures 859,152 858,106
---------- ----------
28,987,593 28,984,672
Less - Accumulated depreciation (11,583,744) (11,038,617)
---------- ----------
17,403,849 17,946,055
Cash and cash equivalents 18,433 28,064
Restricted cash 281,717 280,896
Investment in affiliate (16,440) (8,971)
Other assets (net of amortization of
$645,873 and $548,506 at June 30, 1999
and December 31, 1998, respectively) 509,968 632,692
---------- ----------
Total $18,197,527 $18,878,736
========== ==========
Liabilities and Partners' Equity
Liabilities:
Debt obligations $17,160,332 $17,161,190
Accounts payable:
Trade 1,179,987 1,081,777
Taxes 15,123 20,492
Related parties 396,529 396,529
Other 10,781 27,039
Interest payable 998,824 870,643
Tenant security deposits 137,441 129,858
---------- ----------
Total liabilities 19,889,017 19,687,528
---------- ----------
Partners' equity (1,701,490) (808,792)
---------- ----------
Total $18,197,527 $18,878,736
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended June 30, 1999 and 1998
(Unaudited)
Three months Six months
Ended June 30, Ended June 30,
1999 1998 1999 1998
Revenues:
Rental income $ 589,850 $ 581,156 $1,184,517 $1,153,071
Interest income 594 1,192 1,834 1,525
------- ------- --------- ---------
Total revenues 590,444 582,348 1,186,351 1,154,596
------- ------- --------- ---------
Costs and expenses:
Rental operations 250,951 229,151 607,299 575,846
General and administrative 60,000 60,000 120,000 120,000
Interest 352,920 362,971 701,789 712,862
Depreciation and
amortization 288,826 289,080 642,492 578,161
------- ------- --------- ---------
Total costs and expenses 952,697 941,202 2,071,580 1,986,869
------- ------- --------- ---------
Loss before equity in affiliate(362,253) (358,854) (885,229) (832,273)
Equity in net loss of affiliate (3,576) (3,137) (7,469) (6,424)
------- ------- --------- ---------
Net loss ($ 365,829) ($ 361,991) ($ 892,698)($ 838,697)
======= ======= ========= =========
Net loss per limited
partnership unit
Loss before equity in affiliate($ 14.08) ($ 13.96) ($ 34.43)($ 32.36)
Equity in net loss of affiliate (.14) (.12) (.29) (.25)
------ -------- --------- ---------
($ 14.22) ($ 14.08) ($ 34.72)($ 32.61)
====== ======== ========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1999 and 1998
(Unaudited)
Six months ended
June 30,
1999 1998
Cash flows from operating activities:
Net loss ($892,698) ($838,697)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 642,492 578,161
Equity in loss of affiliate 7,469 6,424
Changes in assets and liabilities:
(Increase) decrease in restricted cash (821) 38,358
Decrease (increase) in other assets 25,356 (3,089)
Decrease in accounts payable taxes (5,369) 0
Increase in accounts payable - trade 98,209 100,068
Increase in accounts payable - related parties 0 5,582
(Decrease) increase in accounts payable - other (16,258) 21,836
Increase in interest payable 128,181 176,044
Increase in tenant security deposits 7,583 13,470
------- -------
Net cash (used in)provided by operating activities (5,852) 98,157
------- -------
Cash flows from investing activities:
Capital expenditures (2,921) (12,251)
------- -------
Net cash used in investing activities (2,921) (12,251)
------- -------
Cash flows from financing activities:
Proceeds from debt financing 0 6,831
Principal payments (858) (84,098)
------- -------
Net cash used in financing activities (858) (77,267)
------- -------
(Decrease) increase in cash and cash equivalents (9,631) 8,639
Cash and cash equivalents at beginning of period 28,064 23,036
------- -------
Cash and cash equivalents at end of period $ 18,433 $ 31,675
======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS VI
(a Pennsylvania limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of Diversified
Historic Investors VI (the "Registrant") and related notes have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. The accompanying
consolidated financial statements and related notes should be read in
conjunction with the audited financial statements in Form 10-K and
notes thereto, in the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998.
The information furnished reflects, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a
fair presentation of the results of the interim periods presented.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
To the best of its knowledge, Registrant is not party
to, nor is any of its property the subject of any pending material
legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the quarter covered by
this report to a vote of security holders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Document
Number
3 Registrant's Amended and Restated Certificate
of Limited Partnership and Agreement of
Limited Partnership, previously filed as part
of Amendment No. 2 of Registrant's
Registration Statement on Form S-11, are
incorporated herein by reference.
21 Subsidiaries of the Registrant are listed in
Item 2. Properties on Form 10-K, previously
filed and incorporated herein by reference.
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the
quarter ended June 30, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: September 7, 1999 DIVERSIFIED HISTORIC INVESTORS VI
-----------------
By: Dover Historic Advisors VI, General Partner
By: EPK, Inc., Partner
By: /s/ Spencer Wertheimer
----------------------
SPENCER WERTHEIMER
President and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 18,433
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 28,987,593
<DEPRECIATION> 11,583,744
<TOTAL-ASSETS> 18,197,527
<CURRENT-LIABILITIES> 1,179,987
<BONDS> 17,160,332
0
0
<COMMON> 0
<OTHER-SE> (1,701,490)
<TOTAL-LIABILITY-AND-EQUITY> 18,197,527
<SALES> 0
<TOTAL-REVENUES> 1,186,351
<CGS> 0
<TOTAL-COSTS> 607,299
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 701,789
<INCOME-PRETAX> (892,698)
<INCOME-TAX> 0
<INCOME-CONTINUING> (892,698)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (892,698)
<EPS-BASIC> 0
<EPS-DILUTED> (34.72)
</TABLE>
